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Canfor Corporation (TSX:CFP) released its first quarter 2025 results on May 9, showing improved performance with narrowing losses despite ongoing market challenges. The forestry company reported a net loss of $31 million ($0.26 per share) on sales of $1.42 billion, beating analyst expectations but still operating in negative territory.
Quarterly Performance Highlights
Canfor’s Q1 2025 results demonstrated continued progress in reducing losses compared to previous quarters. The company reported an operating loss of $28.5 million, an improvement from the $45.9 million loss in Q4 2024 and the $85.8 million loss in Q1 2024. Sales increased to $1,417.5 million, up from $1,285.7 million in the previous quarter.
As shown in the following financial overview, the company’s adjusted operating loss narrowed to $32.2 million from $82.0 million in Q4 2024, while adjusted operating income before amortization rose to $68.9 million from $16.6 million:
Despite beating analyst expectations with an actual EPS of -$0.32 versus a forecast of -$0.332 and revenue exceeding forecasts by $160 million, Canfor’s stock fell by 3.01% following the earnings announcement, closing at $13.96. This market reaction suggests investors remain cautious about the company’s outlook amid volatile market conditions.
Segment Analysis: Lumber
Canfor’s lumber segment, which represents the majority of the company’s business, reported an operating loss of $25.5 million in Q1 2025, improving from a $36.6 million loss in Q4 2024. The segment benefited from higher North American lumber prices, with the Western SPF 2x4 #2&Btr price averaging US$492 per Mfbm, up 13% from the previous quarter.
The following table details the lumber segment’s performance metrics:
Total (EPA:TTEF) lumber production remained stable at 1.20 billion board feet quarter-over-quarter. The average North American SYP East 2x4 #2 price opened the quarter at US$414 per Mfbm and increased steadily throughout the period, finishing at US$475 per Mfbm, reflecting improving market conditions.
Segment Analysis: Pulp and Paper
In contrast to the lumber segment, Canfor’s pulp and paper operations delivered positive results with an operating income of $10.8 million in Q1 2025, up from $4.1 million in Q4 2024. This improvement was driven by a modest uplift in NBSK pulp unit sales combined with a 6% increase in pulp production.
The market outlook for pulp showed some positive signs during the quarter, as illustrated in the following segment highlights:
Global softwood pulp market fundamentals saw some improvement in Q1 2025, with producer inventories declining through the quarter, ending February at 40 days of supply, a decrease of 2 days compared to December 2024. US-dollar NBSK pulp list prices to China averaged US$793 per tonne, up 3% from the prior quarter.
Market Outlook and Forward Guidance
Canfor’s presentation indicates a cautious outlook for the remainder of 2025, with volatility and uncertainty expected in the North American lumber market. Affordability challenges and trade issues continue to impact demand, leading the company to focus more on domestic markets.
The following market outlook provides insights into Canfor’s expectations across different regions:
For Japan, demand and pricing are expected to improve in Q2 2025, while China’s market conditions are projected to remain subdued. In Europe, supply is anticipated to remain under pressure due to log constraints and high prices.
The pulp market outlook is similarly cautious, with momentum diminishing as global economic and trade uncertainty rises. CEO Susan Yerkovich stated in the earnings call, "We’re positioned to navigate the current environment," emphasizing the company’s strategic readiness.
Financial Position and Investor Reaction
Canfor’s financial adjustments reveal the impact of specific material items on the company’s performance, as shown in the following reconciliation:
Despite the quarterly improvements, Canfor continues to face challenges with cash flow. According to the earnings call transcript, the company is currently burning through cash, with negative free cash flow of $251 million over the last twelve months. However, the company maintains a healthy current ratio of 1.77, suggesting adequate liquidity to manage near-term obligations.
Investors reacted negatively to the earnings release despite the beat on both EPS and revenue forecasts. The stock’s 3.01% decline following the announcement reflects ongoing concerns about market conditions and the sustainability of improvements. Trading near its 52-week low of $12.60, with a 52-week high of $18.38, Canfor’s stock performance indicates continued investor caution about the forestry sector’s prospects amid global economic uncertainty.
Looking ahead, Canfor is preparing for an elevated duty environment later in the year and potential trade disruptions affecting pulp pricing in Q2. While two analysts have recently revised their earnings expectations upward for the upcoming period, the company’s diversified global platform and balance sheet strength will be tested as it navigates these challenges.
Full presentation:
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